Question 1

Which of the following describes the relative positions of the demand curve and the average total cost (ATC)  curve of a monopolistically competitive firm that earns a profit in the short run?

Accepted Answer

A)   In the short run, the firm's demand curve will lie above its ATC curve. The demand curve will be tangent to the ATC curve in the long run.
B)   In the short run, the firm's demand curve will lie below its ATC curve. The demand curve will be tangent to the ATC curve in the long run.
C)   In the short run, the firm's demand curve will cross its ATC curve at the ATC curve's lowest point. The demand curve will be above the ATC curve in the long run.
D)   In the short run, the firm's ATC curve will cross the demand curve at the profit maximizing level of output. The demand curve will be tangent to the ATC curve in the long run.E) C) and D)
F) A) and C)

Question 2

Figure 13-17 f units and not Qg units, which has a lower its average cost of production? A)  Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. B)  At Qg, average cost exceeds marginal cost so the firm will actually make a loss. C)  At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. D)  The firm's goal is to charge a high price and make a small profit rather than a low price and no profit." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-17. In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

Accepted Answer

A)   Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss.
B)   At Qg, average cost exceeds marginal cost so the firm will actually make a loss.
C)   At Qg, marginal revenue is less than average revenue which will result in a loss for the firm.
D)   The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.E) None of the above
F) A) and C)

Question 3

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   relatively elastic.E) B) and C)
F) A) and D)

Question 4

Which of the following can a firm use to defend a successful product's brand name?

Accepted Answer

A)   The firm can obtain a patent on the brand name.
B)   The firm can apply for a trademark to ban other firms from using the product's name.
C)   The firm can increase the amount it spends on advertising for the product.
D)   The firm can attempt to copyright the brand name.E) B) and C)
F) B) and D)

Question 5

If a firm faces a downward-sloping demand curve,

Accepted Answer

A)   the demand for its product must be inelastic.
B)   it has no control over the price or the quantity sold.
C)   it must reduce its price to sell more units.
D)   it will always make a profit.E) A) and C)
F) B) and C)

Question 6

If a firm has excess capacity, then

Accepted Answer

A)   the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales.
B)   the firm is not producing its minimum efficient scale of output.
C)   the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity.
D)   the firm's quantity supplied exceeds its quantity demanded.E) All of the above
F) A) and D)

Question 7

Figure 13-4 1aQa B)  P0adP3 C)  P1bdP3 D)  That information cannot be determined from the graph." class="answers-bank-image d-inline" rel="preload" > Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4. What is the area that represents the total fixed cost of production?

Accepted Answer

A)   0P1aQa
B)   P0adP3
C)   P1bdP3
D)   That information cannot be determined from the graph.E) B) and C)
F) A) and D)

Question 8

Figure 13-3 
-Refer to Figure 13-3. What is the marginal revenue of the sixth unit of output?

Accepted Answer

A)   $4
B)   $5
C)   $9
D)   $54E) A) and D)
F) A) and C)

Question 9

Figure 13-11 1 B)  P2 C)  P3 D)  P4" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing price?

Accepted Answer

A)   P1
B)   P2
C)   P3
D)   P4E) B) and C)
F) A) and D)

Question 10

All of the following characteristics are common to both monopolistic competition and perfect competition except

Accepted Answer

A)   firms act to maximize profit.
B)   entry barriers into the industries are low.
C)   the market demand curves are downward-sloping.
D)   firms take market prices as given.E) B) and D)
F) B) and C)

Question 11

For a profit-maximizing monopolistically competitive firm, for the last unit sold, the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

Accepted Answer

A) True 
 B)False

Question 12

Table 13-4
  Table 13-4 lists estimated revenues and costs (per week)  for plastic vials (100 vials per box)  for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories.
-Refer to Table 13-4. Victoria's profit-maximizing output is where

Accepted Answer

A)   total profit equals $3.
B)   marginal revenue and marginal cost both equal $4.
C)   marginal revenue and marginal cost both equal $3.
D)   marginal cost is at its minimum value.E) A) and D)
F) B) and D)

Question 13

When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit.

Accepted Answer

A) True 
 B)False

Question 14

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning an economic profit.

Accepted Answer

A) True 
 B)False

Question 15

What is meant by "excess capacity"? How does it relate to consumer utility?

Accepted Answer

Excess capacity refers to a situation wh...

Question 16

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Accepted Answer

A) True 
 B)False

Question 17

If a typical monopolistically competitive firm is incurring short-run losses, then

Accepted Answer

A)   other more competitive firms will enter the market.
B)   as some firms leave, the remaining firms will experience an increase in the demand for their products.
C)   as some firms leave, the demand for the products of the remaining firms will become more elastic.
D)   the industry will eventually cease to exist.E) A) and B)
F) A) and C)

Question 18

Figure 13-9 
-Refer to Figure 13-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Accepted Answer

A)   Panel A
B)   Panel B
C)   Panel C
D)   Panel A and Panel BE) A) and D)
F) B) and C)

Question 19

Which of the following is true for a firm with a downward-sloping demand curve for its product?

Accepted Answer

A)   Price, average revenue, and marginal revenue are all equal.
B)   Price, average revenue, and marginal revenue are all different.
C)   Price equals average revenue but is greater than marginal revenue.
D)   Price equals average revenue but is less than marginal revenue.E) A) and D)
F) A) and C)

Question 20

Figure 13-11 1 units B)  Q2 units C)  Q3 units D)  Q4 units" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-11. What is the productively efficient output for the firm represented in the diagram?

Accepted Answer

A)   Q1 units
B)   Q2 units
C)   Q3 units
D)   Q4 unitsE) B) and D)
F) B) and C)

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

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Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. What is the area that represents the total fixed cost of production?

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Figure 13-11 -Refer to Figure 13-11. What is the productively efficient output for the firm represented in the diagram?

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Which of the following is true for a firm with a downward-sloping demand curve for its product?

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Figure 13-11 -Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing price?

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Which of the following can a firm use to defend a successful product's brand name?

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All of the following characteristics are common to both monopolistic competition and perfect competition except

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When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit.

Correct AnswerverifiedShow Answer

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning an economic profit.

Correct AnswerverifiedShow Answer

If a firm faces a downward-sloping demand curve,

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Figure 13-17 -Refer to Figure 13-17. In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

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If a typical monopolistically competitive firm is incurring short-run losses, then

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What is meant by "excess capacity"? How does it relate to consumer utility?

Correct AnswerverifiedExcess capacity refers to a situation wh...View AnswerShow Answer

If a firm has excess capacity, then

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Table 13-4 Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories. -Refer to Table 13-4. Victoria's profit-maximizing output is where

Correct AnswerverifiedShow Answer

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

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For a profit-maximizing monopolistically competitive firm, for the last unit sold, the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

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Figure 13-3 -Refer to Figure 13-3. What is the marginal revenue of the sixth unit of output?

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Figure 13-9 -Refer to Figure 13-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

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Which of the following describes the relative positions of the demand curve and the average total cost (ATC) curve of a monopolistically competitive firm that earns a profit in the short run?

Correct AnswerverifiedShow Answer

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Figure 13-17 -Refer to Figure 13-17. In the long run, why will the firm produce Q_f units and not Q_gunits, which has a lower its average cost of production?

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Excess capacity refers to a situation wh...
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